Correlation Between Mount Gibson and MAG SILVER

Can any of the company-specific risk be diversified away by investing in both Mount Gibson and MAG SILVER at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Mount Gibson and MAG SILVER into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mount Gibson Iron and MAG SILVER, you can compare the effects of market volatilities on Mount Gibson and MAG SILVER and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Mount Gibson with a short position of MAG SILVER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mount Gibson and MAG SILVER.

Diversification Opportunities for Mount Gibson and MAG SILVER

0.52

Correlation Coefficient

Mount Gibson  MAG SILVER

Very weak diversification

The 3 months correlation between Mount and MAG is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Mount Gibson Iron and MAG SILVER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAG SILVER and Mount Gibson is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Mount Gibson Iron are associated (or correlated) with MAG SILVER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAG SILVER has no effect on the direction of Mount Gibson i.e., Mount Gibson and MAG SILVER go up and down completely randomly.

Pair Corralation between Mount Gibson and MAG SILVER

Assuming the 90 days horizon Mount Gibson Iron is expected to generate 1.74 times more return on investment than MAG SILVER. However, Mount Gibson is 1.74 times more volatile than MAG SILVER. It trades about -0.01 of its potential returns per unit of risk. MAG SILVER is currently generating about -0.08 per unit of risk. If you would invest  18.00  in Mount Gibson Iron on October 25, 2024 and sell it today you would lose (1.00) from holding Mount Gibson Iron or give up 5.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Mount Gibson Iron  vs.  MAG SILVER

Mount Gibson Iron

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mount Gibson Iron has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Mount Gibson is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

MAG SILVER

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MAG SILVER has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Mount Gibson and MAG SILVER

The main advantage of trading using opposite Mount Gibson and MAG SILVER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mount Gibson position performs unexpectedly, MAG SILVER can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in MAG SILVER will offset losses from the drop in MAG SILVER's long position.

The idea behind Mount Gibson Iron and MAG SILVER pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.